13 States File Briefs Against Credit Scoring in U.S. Supreme Court Case

December 27, 2006

Delaware Insurance Commissioner Matt Denn has taken arguments against insurance industry use of credit scoring to the U.S. Supreme Court, filing a brief in a pending case involving the practice.

Denn recruited 12 other state insurance commissioners to join Delaware in filing the brief.

Denn's amicus curiae, or "friend of the court," brief was filed last Monday with the Supreme Court in Washington, D.C. in the cases of Safeco v. Burr and GEICO v. Edo.

Consumers in the cases claim that insurance companies Safeco and GEICO violated the federal Fair Credit Reporting Act. The consumers said that when a consumer's credit information resulted in the consumer receiving a higher rate, insurers should have sent out "adverse action notices" required under FCRA and acted in "willful" disregard of the FCRA in not doing so.

FCRA adverse action notices are sent to consumers by banks, landlords and others when a consumer's credit report has caused them to be denied for a loan or a lease, for example, or even if a consumer is required to have a higher than usual down payment or deposit due to their credit score, the brief notes.

Denn and the 12 other insurance commissioners told the Supreme Court that they were filing their brief to "further their collective mission of protecting consumers by supporting interpretations of the FCRA that (a) put valuable information in the hands of consumers, (b) provide appropriate incentives for insurance companies that use consumer credit information to adopt procedures that assure compliance with the law, and (c) hold insurance companies accountable when they adopt policies that recklessly disregard consumer rights in contravention of the FCRA."

The brief urges the Supreme Court to uphold the decisions of the 9th Circuit Court of Appeals in the Safeco and GEICO cases that the companies willfully disregarded the FCRA by not sending adverse action notices to some consumers.

"I will continue to support legislation that would prohibit the use of credit scoring in auto and homeowners insurance, but I also thought it important to weigh in on this case," Denn said. "As long as our law allows insurance companies to use credit scoring, consumers deserve to know when something in their credit score has resulted in them getting higher rates."

The other state insurance commissioners joining Denn on the brief include those from Arkansas, California, Georgia, Iowa, Kansas, Michigan, Montana, New Mexico, North Dakota, Oklahoma, Utah and Washington.

The full captions for the consolidated cases are Safeco Insurance Co. of America v. Charles Burr (No. 06-84, Sup. Ct.), and GEICO General Insurance Company v. Ajene Edo (No. 06-100, Sup. Ct.).

Source: Delaware Insurance Commissioner